Kalshi Takes Legal Blow in Court Ruling Confirming State Powers Over Prediction Markets

A federal appeals court handed Kalshi a loss Friday. The prediction-market platform, the three-judge panel said, failed to show that federal law insulates its sports contracts from Nevada’s gambling statutes.

The Ninth Circuit affirmed a lower court’s decision to dissolve a preliminary injunction that had temporarily blocked Nevada from enforcing its gaming regulations against Kalshi’s sports and election event contracts. The opinion, dated Aug. 28, 2026, is docketed as No. 25-7516.

The core question was preemption. Kalshi argued the Commodity Exchange Act occupies the field, leaving no room for state gambling laws to reach its contracts. The panel disagreed.

“We conclude that Kalshi has not shown a likelihood that the CEA preempts state gaming regulations as applied to its sports event contracts and that the district court did not abuse its discretion by dissolving the injunction,” the court wrote.

The CEA likely does not preempt Nevada’s gaming regulations as applied to Kalshi’s sports event contracts. That holding strips the company of the legal theory it has leaned on in multiple state fights.

How the Nevada Case Got Here

The dispute traces to 2025. The Nevada Gaming Control Board sent Kalshi a cease-and-desist letter that year. The demand was blunt: stop offering election and sports event contracts in Nevada or face criminal or civil charges.

Kalshi sued the board and the state. A district judge granted a preliminary injunction. Then a separate ruling went against Crypto.com. The court dissolved Kalshi’s injunction too. Kalshi appealed. Friday’s decision closes that chapter against the company.

CFTC and Kalshi Both Signal Further Fight

CFTC Chair Michael Selig has staked out a broad position. The agency holds “exclusive jurisdiction” over prediction markets, in his view, sports contracts included. The CFTC has sued several states as federal and state regulators clash over how the industry, now valued at billions of dollars, should be regulated. A proposed framework for the sector is also on the table.

The CFTC sued New York over its prediction-market crackdown. In a related Kalshi case, 38 attorneys general backed Massachusetts.

Zach Fulton, a CFTC spokesperson, pushed back hard in an emailed statement Friday.

“A derivative contract structured as a swap is a swap regardless of the underlying subject matter — the only exceptions in statute are onions and movie box office receipts,” Fulton said. “The Ninth Circuit erred today when it invented a new and textual exception to the CEA.”

He added that the case is “now teed up a circuit split that calls out for resolution by the Supreme Court.”

Kalshi struck a similar tone.

“Despite the Ninth Circuit’s opinion, we still believe the CFTC regulations as written do not prohibit sports contracts, and in any event, the CFTC is working to clarify those regulations,” spokesperson Dani Lever said in a statement. “We will be seeking further review.”

Neither the CFTC nor Kalshi specified a venue or timeline. Further review could mean an en banc rehearing at the Ninth Circuit or a cert petition at the Supreme Court. Either path keeps the preemption question alive.

What It Means for Prediction Markets

State officials across the country have raised concerns about prediction markets as the industry has grown. Much of the worry centers on sports-related contracts. States argue those contracts can amount to gambling and violate their gaming laws.

Friday’s ruling hands those states a precedent. It tells them the CEA is not the blanket shield prediction-market platforms have claimed. Other circuits may disagree. The Supreme Court, if it takes the case, would settle it.

Until then, the map stays fractured. Kalshi operates under one set of rules in some states and faces enforcement in others. The company’s next move will signal how broadly it intends to press the preemption argument as the regulatory map grows more uneven.